Comment on interest rate announcement

Consumers rejoice as interest rate drops below 9% for the first time in over 30 years, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

At the conclusion of today’s Monetary Policy Committee meeting, Reserve Bank Governor, Gill Marcus, announced that the prime lending rate would drop by a further 50 basis points, bringing the rate down to just 8,5%.  This is a rate cut that many thought was unlikely and one which has not been seen in the last 39 years.

The record low rate coupled with the higher percentage of bond finance being approved will continue to stimulate the improved property sales over the past few quarters. Since the reduction of the rate to 9% in November 2010, many consumers have been able to reduce their household debt and show more disposable income at the end of the month.  This has resulted in more first-time buyers able to enter the market than before, due to them being able to show affordability and obtain bigger bonds. The increased affordability levels are driving up demand in the property sector, which in turn will continue to have an impact on property pricing in the future.
Traditionally the South African property market reacts quite slowly to a rate cut or increase, so the decrease in the interest rate will definitely spur consumer confidence in the months ahead and will certainly give prospective property buyers something to smile about.

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